As the economy worsens, are luxury products still a safe investment?

The luxury fashion industry often bills its products as possessions, not just purchases. Observant collectors sometimes refer to their collections as “portfolios,” which can hold value over time and even appreciate in value.

But recent events have shaken faith in the idea of ​​investing in alternative assets. When the FTX cryptocurrency exchange collapsed in early November, users collectively lost billions of dollars. At the same time, the worsening US economy and rising inflation mean that the average American consumer is in a difficult financial situation. As other investments and assets such as NFTs are trending lower than ever, can luxury fashion still hold appeal as a safe asset to invest in?

Many resellers say yes. Tirath Kamdar, general manager of luxury at eBay, said a big part of eBay’s appeal to luxury consumers is that they can buy something for a good price and resell it at a later date to recoup some or most of the original cost. In a survey of its users by eBay earlier this month, 85% said they saw luxury items such as watches as safer and less volatile assets to invest in “compared to other assets”.

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“Many of our customers see luxury as a currency,” Kamdar said. “We’ve grown in previous recessions, and Ben is still reporting [the luxury industry will grow] throughout this year.”

But there is a caveat. For luxury goods to be a safe asset, the customer must be knowledgeable about what they are buying, the worker said.

To that end, eBay has a pricing tool called Terrapack that it made free to all users last year, letting them see current retail prices, historical resale prices and listing history for products. This is meant to be helpful for both sellers and buyers to understand what they are buying, how well it holds value and what its future value might be. Handbag reseller Rebag has a similar tool called Claire that customers can use to estimate the resale value of any bag before purchasing.

“Specific categories like watches and handbags have the highest chance of appreciating over time, but they require a lot of customer knowledge,” said Yuri Dovzhansky, principal at Visible Ventures, which invests in resale companies like Recurate.

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Handbags can be compared to watches in this respect, but only for specific brands. While many luxury Swiss watch brands may be value-holding assets – including Rolex, Patek Philippe, Omega, Paneria and Tag Heuer – only three handbag brands have similar properties – Hermès, Chanel and Louis Vuitton – according to secondhand luxury platform LePrix.

Beyond education, another factor is whether or not those values ​​are holding up. Tim Strack, founder and co-CEO of watch trading marketplace Chrono24, said he recently attended an investor conference where an investor told him his watch portfolio was outperforming his stock portfolio at the moment.

“Clocks are a fixed asset,” Strack said. “You can buy a Rolex directly from the brand and immediately be able to resell it for more than you paid for it. However, that’s also because it’s impossible to get a Rolex on the primary market right now. The waiting list is years long.

But even watches are not completely immune to market conditions. The price of watches when bought directly from the brand has risen by up to 10% this year, tracking with inflation and accounting for increased costs of production. But in the secondary market, watch prices are actually falling, falling by about 2% in September, according to watch market tracker WatchCharts.

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“Watch prices on the secondary market are going down,” Dovzhanksy said. “It’s a very significant dip. There’s definitely some volatility. If you’re really savvy, it’s great, but I wouldn’t say it’s my top recommendation for the safest investment.

For some in the luxury space, luxury assets are still well-suited to the crypto market’s erratic volatility.

“Customers who bought rings from us in 2019 came in for a reevaluation this year because diamond prices have soared recently,” said Olivia Landau, founder and CEO of fine jewelry and diamond brand The Clear. cut out “People are interested in old-school investments like gold or diamonds because they’ve seen how crypto and NFTs have treated everyone.”

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